Analysis

In a keynote interview at the Amsterdam Dance Event (ADE) conference in Amsterdam, Tencent Music’s Andy Ng outlined his role in combatting piracy in China, building a legal streaming market there and why he and his employers are betting heavy on the EDM boom.

Ng stepped back from his role as group VP at Tencent Music Entertainment back in March but remains a key consultant. He mentioned in his keynote that this was down to a combination of family commitments and health reasons. He remains, however, deeply involved in Liquid State, the EDM-focused joint-venture between Tencent and Sony Music which was set up in early 2018.

Ng joined Tencent in 2011, looking after the QQ Music service, at a time when China was being ravaged by online piracy. He said Tencent’s investments across assorted categories – notably gaming and video, both of which were at the front line of the piracy battle – were key to the company’s push towards creating a fully licensed environment in China.

“At the time, the market was not mature enough,” he said of his early days at QQ. “Everything was mostly pirated, meaning the artist or music labels did not get any revenue from the Chinese market. After 2012, we got a chance to really review the whole music service internally. Thanks to the senior management [at Tencent], they agreed that we should change the market – that we should really turn the market around.”

Tencent took its thinking and experience around games and videos and applied that to music, striking sole distribution deals with the three major labels for China in 2012.

“For the first two years basically what happened was that Tencent was helping all these music labels who agreed to give us this sole distribution rights and we just hit really hard on the piracy issue,” he says. “We sued almost every single music portal that was infringing content.”

In its push to establish a paid model in China, lobbying at a governmental level also started to bear fruit in 2015. “One of the very big pirate sites at that time overnight had to take down 250m tracks,” he says. “That’s how the revolution began in China.”

Ng talked about the latest figures from Tencent Music – it had 652 million mobile monthly active users across its three streaming services at the end of June, including 31 million paying users. He accepted this was an incredibly low conversion rate compared to more mature Western markets where anywhere between 25% and 40% of services’ users are paying.

“We only started around two years ago,” Ng said. “So we have… 30m subscribers. But if you are doing this [total] conversion rate, we are still at around 5%.”

Growing this is obviously a priority for the company, but Ng said that even if it can get to 10% conversion, in a world where Tencent Music has 800 million users, that would be 80 million subscribers.

The intense workload in setting up legal services in China, combined with personal issues, has seen Ng less involved in the daily activities of Tencent Music Entertainment and instead shift focus to Liquid State and the rise of dance music in China. “For the past seven years, it has been like a war zone – fighting piracy,” he said. “I have been really tired.”

The joint-venture discussions that eventually led to Liquid began as a pan-genre idea but that was eventually narrowed down to focus on EDM as he feels it, more than any other genre, has the greatest potential in China.

“There’s no language barrier,” he argues. “In China, 80% of our entire users still prefer listening to Chinese music in the Chinese language. But electronic dance music, however, is more about dancing and the music.”

Of that 20% share for non-Chinese music, 12% is Western music and the other 8% is mainly Korean, Japanese and instrumental music, estimated Ng, although he sees a growing appetite for western music in China.

He added that inspiration came from the music industry in South Korea, because companies there were prescient enough to see how the global business and the global sound of music was changing.

“I believe that right now so many different genres should be doing a lot of different crossovers,” he said. “Korea is one of the biggest markets in Asia and that is because they have already foreseen how pop music should blend in with EDM to make a hit.”

He talked about how Western acts are starting to impact in China, holding up Alan Walker as a catalyst. Ng claimed that Walker’s breakthrough track ‘Faded’ has been streamed 6bn times in total across Tencent’s services.

“Alan Walker gets a lot of followers because of that,” he said, talking about his appeal on music services in China that blur the lines between streaming and social media.” Right now, there are so many fans in China that they are looking at where and when he will perform. Alan Walker has been a huge success story.”

Where he says Tencent can help grow Walker further in China is in facilitating collaborations with Chinese acts and using that to introduce him to whole new audiences. He added that this is a template that others are coming to Tencent to see if it can be replicated. Ng talked about meeting with artist R3HAB about precisely this. “He said to us that he wants us to do the exact same thing for him that we did with Alan Walker.”

Outside of EDM, Ng pointed to karaoke as another of Tencent Music’s success stories – it had 239 million mobile monthly active users for its karaoke and live-video services at the end of June, but as Music Ally reported at the time, that ‘social entertainment’ category generated 73.5% of the company’s revenues. Ng said that karaoke success in China is being used to parlay it into other markets in the region.

“This year, we started to expand this product into different Asian markets like Indonesia, Malaysia, Vietnam and Thailand,” he said. “We are also looking at the market in Europe to see whether there’s a demand for that. If there is then we don’t mind to launch this product across the globe and see how it goes.”

During the audience Q&A, Music Ally asked Ng about the role of playlists in China and how to navigate the rapid turnover there. Playlists tend to be updated daily and a track remaining on a leading playlists for three days is seen as a success.

He responded by saying that there is a volume issue that the company is navigating – with a catalogue of 30m tracks and over 150 leading playlists to maintain – but it is investing in software to assist.

“We have been developing an AI technology – and we are still working very closely on that – where we are guessing for each individual user what they like and want; so it’s like a recommendation engine. It is at a really early phase, so I can’t comment how successful or not it is,” he said.

“The AI engine will basically ask you a few questions on that day. For example, ‘It is raining today. How do you feel?’ If you say you feel shitty, it will start pushing some really depressing songs to you! That engine [should] start pushing some really cool music to you.”

For now, he admitted that applying this to international catalogue was proving an onerous undertaking. The company needs to analyse and tag every song along a variety of categories – lyrics, rhythm, mood and so on – and it is slowly chopping through this.

“We have about 30m tracks at this moment so it’s a huge job to have all that in place,” he said. “We are slowly doing so and we’re just trying to improve this in the long run.”

Ng’s war zone metaphors may have subsided but the next front for everyone in China is the less combative, but no less arduous, issue of metadata. Cracking that will be the next music revolution in China.